SME Chamber

FINANCE : Get ready for single euro payments

 Last February, the European Union (EU) legislator adopted Regulation (EU) No 260/2012 establishing technical and business requirements for credit transfers and direct debits in euro and amending Regulation (EC) No 924/2009, commonly referenced as the Single Euro Payments Area (SEPA) Regulation.

The SEPA Regulation defines 1 February 2014 as the deadline in the euro area for compliance with the core provisions of this regulation. In non euro countries, the deadline will be 31 October 2016. Effectively, this means that as of these dates, existing national euro credit transfer and direct debit schemes will be replaced by SEPA Credit Transfer (SCT) and SEPA Direct Debit (SDD).

SEPA is currently defined as consisting of the 27 EU member states plus Iceland, Norway, Liechtenstein, Switzerland and Monaco. The adoption of the SEPA Regulation demonstrates that "the EU institutions continue to work diligently to deepen the internal market in financial services, with the euro at its core. This agreement is a vote of confidence in the euro, and I am convinced that it will be a good deal for consumers and businesses," said Sharon Bowles, Member of the European Parliament.

SEPA stands for an EU integration initiative in the area of payments. Following the introduction of euro notes and coins in 2002, the political drivers of the SEPA initiative – EU governments, the European Commission and the European Central Bank- focused on harmonising the euro payments market. Integrating the multitude of national payment systems existing today is a natural step towards making the euro a truly single and fully functioning currency.

SEPA is the area where citizens, companies and other economic actors can make and receive payments in euro, throughout Europe, whether within or across national boundaries under the same basic conditions, rights and obligations, regardless of their location.

This original SEPA concept defined by the European public authorities holds that within SEPA all euro payments will be domestic. Once SEPA is achieved, there should be no differentiation between national and cross-border euro payments. As such, SEPA payment instruments are designed to replace national euro payment instruments which exist today.

In a joint statement of May 2006, the European Commission and the European Central Bank pointed out: "The introduction of the euro as the single currency of the euro area will only be completed when SEPA has become a reality, i.e. when consumers, businesses and governments are able to make cashless payments throughout the euro area from a single payment account anywhere in the euro area using a single set of payment instruments as easily, efficiently and safely as they can make payments today in the domestic context."

The SCT and SDD payment schemes facilitate the exchange of electronic euro payments across all 32 SEPA countries. They can be regarded as instruction manuals which provide a common understanding on how to move funds from account A to account B within SEPA. The harmonised SEPA payment schemes can be compared to other frameworks, which prescribe standardised processes to be observed by actors operating in network industries.

An example of such integration initiatives are standardised railway tracks allowing a multitude of commercial railway operators to move their trains across borders. Similar examples of standardisation in network industries can be found in the areas of telecommunication, television or radio.

The purpose of migrating from a multitude of national euro payment schemes for credit transfers and direct debits, to a single set of harmonised SEPA schemes can be compared to implementing standardised railroad tracks for the exchange of payments across the EU. Migration to a single set of SEPA payment schemes allows multiple payment service providers to offer a broad range of diversified payment services and products for euro credit transfers and euro direct debits throughout SEPA. As a result, customers benefit from increased competition and more choices in the payments market.

The European Payments Council (EPC) shares the view that an end date for phasing out legacy euro payment schemes for credit transfers and direct debits ensures planning security for all market participants. The EPC is responsible, among other things, for the development and maintenance of the SCT and SDD Schemes in close dialogue with the customer community.

The introduction of SEPA makes paying bills significantly easier for mobile European citizens including workers, students, holiday home owners, tourists or retirees living abroad. At the same time, SEPA benefits consumers who wish to purchase goods or services from retailers located in SEPA countries other than their home country. All consumers will be able to rely on one home account for all – domestic and cross-border – payments throughout SEPA.

Migrating to harmonised SEPA payment schemes offers businesses significant efficiency gains through the automation of payment processing and the ability of businesses to optimise the cash management process. The latter can be achieved by companies consolidating accounts currently maintained in different European countries to handle local payments into one single account and subsequently centralising liquidity.

The integration of the euro payments market also facilitates the expansion of businesses across national borders, by introducing a standardised payment infrastructure. Innovative end-to-end SEPA solutions based on global technical standards lead to decreased IT costs, simplify reconciliation and help to streamline back office functions.

Early movers on the customer side who reported on their SEPA migration experience in the free online EPC Newsletter concur that migration to SEPA pays off. For example: Stefan Scheidgen, Head of Cash Management and Accounting at Deutsche Post Pension Service Business Division, points out: "We have accomplished execution times of just one business day for SCTs, which allows our contracting partners to save liquidity. In the process of migrating to SEPA, we consolidated the previous four payment systems into one. We plan to further automate our banking processes, based on the implementation of SEPA schemes and standards, which will result in even more efficiency."

The Deutsche Post Pension Service Business Division disburses 25 million pension payments per month on behalf of the public German retirement scheme to retirees residing in Germany and abroad. By January 2012, 22.5 million of these payments were SCTs. The insurance company UNIQA Group Austria, which services approximately 7.5 million customers in 21 regional markets, essentially concluded the transition to both SCT and SDD in 2011.

Thomas Weissmann, Project Manager with the group, stated: "SEPA is an excellent and necessary idea. Migrating to the harmonised SEPA payment schemes allows for more efficient account reconciliation. Being able to collect direct debits throughout Europe using the harmonised SDD Schemes is also a principal advantage for us." Anneli Seppälä, Payment Processing Manager of Kela, the Social Insurance Institution of Finland, concludes: "Our experience confirms that our payment processes are more efficient following SEPA implementation." Kela, which makes some 33.3 million payments annually, completed its migration project at the end of 2010.

Project managers who have already concluded the migration exercise unanimously recommend that organisations that have yet to adapt their systems and operations to SEPA Schemes and technical standards should act immediately.

Gerard Hartsink chaired the EPC from 2002 until June 2012. For more information, visit the EPC Website at

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